DoD's $149M contract for verification system awarded to Lockheed Martin without competition

Contract Overview

Contract Amount: $149,091,346 ($149.1M)

Contractor: Lockheed Martin Corporation

Awarding Agency: Department of Defense

Start Date: 2023-09-15

End Date: 2028-06-30

Contract Duration: 1,750 days

Daily Burn Rate: $85.2K/day

Competition Type: NOT COMPETED

Number of Offers Received: 1

Pricing Type: COST PLUS INCENTIVE FEE

Sector: Defense

Official Description: BUILD, DELIVER, & INTEGRATE THE UPDATED VERIFICATION AND VALIDATION SYSTEM FOR THE USRL AND NIRL

Place of Performance

Location: FORT WORTH, TARRANT County, TEXAS, 76108

State: Texas Government Spending

Plain-Language Summary

Department of Defense obligated $149.1 million to LOCKHEED MARTIN CORPORATION for work described as: BUILD, DELIVER, & INTEGRATE THE UPDATED VERIFICATION AND VALIDATION SYSTEM FOR THE USRL AND NIRL Key points: 1. Contract awarded on a cost-plus-incentive-fee basis, allowing for potential cost overruns. 2. The contract duration of nearly 5 years suggests a long-term need for the system. 3. The absence of competition raises concerns about potential overpayment and lack of innovation. 4. The system's purpose is critical for USRL and NIRL verification, indicating a high-stakes requirement. 5. The contractor, Lockheed Martin, is a major defense contractor with extensive experience. 6. The contract's value is substantial, representing a significant investment by the Department of the Navy.

Value Assessment

Rating: questionable

Benchmarking the value of this contract is challenging due to its sole-source nature and the specific nature of the 'Updated Verification and Validation System for the USRL and NIRL.' Without competitive bids, it's difficult to ascertain if the $149 million represents a fair market price. The cost-plus-incentive-fee structure, while common in complex defense projects, introduces risk for the government, as contractor costs can exceed initial estimates, with incentives potentially driving up the final price. Further analysis would require understanding the specific deliverables and comparing them to similar system development contracts, if available.

Cost Per Unit: N/A

Competition Analysis

Competition Level: sole-source

This contract was awarded on a sole-source basis, meaning there was no open competition. This typically occurs when a specific contractor possesses unique capabilities, proprietary technology, or when urgency dictates a rapid award. The lack of competition means the Department of the Navy did not benefit from a range of proposals and pricing strategies that would typically emerge from a competitive bidding process. This can lead to higher prices and potentially less favorable terms for the government.

Taxpayer Impact: Taxpayers may be paying a premium for this system due to the absence of competitive pressure to drive down costs. Without competing offers, there is less assurance that the government secured the best possible value for its investment.

Public Impact

The primary beneficiaries are the Department of the Navy and potentially other branches of the Department of Defense that utilize the USRL and NIRL systems. The contract will deliver an updated verification and validation system, crucial for ensuring the accuracy and reliability of these critical national systems. The geographic impact is likely concentrated within the operational areas of the USRL and NIRL systems, with potential implications for national security operations. The workforce implications will primarily affect Lockheed Martin employees involved in the design, development, integration, and maintenance of the new system.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Sole-source award limits price discovery and potentially increases costs for taxpayers.
Cost-plus-incentive-fee contract structure carries inherent risk of cost overruns.
Lack of competition may stifle innovation and reduce contractor urgency.
The specific nature of USRL/NIRL systems makes it difficult to benchmark value externally.

Positive Signals

Lockheed Martin is a highly experienced defense contractor with a proven track record in complex system development.
The contract addresses a critical need for updated verification and validation systems, essential for national security.
The incentive fee structure, if structured effectively, can align contractor performance with government objectives.

Sector Analysis

This contract falls within the 'Search, Detection, Navigation, Guidance, Aeronautical, and Nautical System and Instrument Manufacturing' sector, a specialized area of defense manufacturing. The market for such sophisticated systems is often dominated by a few large, established defense contractors due to high barriers to entry, including technological expertise, security clearances, and existing relationships with government agencies. The $149 million value is significant but not unusual for complex defense system development and integration projects of this nature.

Small Business Impact

This contract does not appear to involve a small business set-aside, as indicated by the sole-source award to Lockheed Martin Corporation. There is no explicit information regarding subcontracting plans for small businesses. Without a competitive process or specific set-aside requirements, the direct impact on the small business ecosystem for this particular contract is likely minimal, though large prime contractors often engage small businesses for specialized components or services.

Oversight & Accountability

Oversight for this contract will primarily be managed by the Department of the Navy's contracting and program management offices. Accountability measures will be tied to the terms of the cost-plus-incentive-fee contract, focusing on performance milestones and cost control. Transparency may be limited due to the sole-source nature and the classified or sensitive aspects of the USRL and NIRL systems. The Inspector General of the Department of Defense would have jurisdiction to investigate potential fraud, waste, or abuse.

Related Government Programs

Department of Defense Research and Development
Naval Systems Development
Information Systems Modernization
Defense Contract Management
System Integration Services

Risk Flags

Sole-source award
Cost-plus-incentive-fee contract type
Lack of competitive bidding
Potential for cost overruns

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $149.1 million to LOCKHEED MARTIN CORPORATION. BUILD, DELIVER, & INTEGRATE THE UPDATED VERIFICATION AND VALIDATION SYSTEM FOR THE USRL AND NIRL

Who is the contractor on this award?

The obligated recipient is LOCKHEED MARTIN CORPORATION.

Which agency awarded this contract?

Awarding agency: Department of Defense (Department of the Navy).

What is the total obligated amount?

The obligated amount is $149.1 million.

What is the period of performance?

Start: 2023-09-15. End: 2028-06-30.

What is the specific function and importance of the USRL and NIRL systems that necessitate this verification and validation system?

The provided data does not detail the specific functions of the USRL (likely a radar or sensor system) and NIRL (potentially a navigation or identification system). However, their designation within the Department of Defense and the substantial investment in a dedicated verification and validation system suggest they are critical for national security operations. Verification and validation are essential processes to ensure that systems perform as intended, meet requirements, and are free from defects. For defense systems, this ensures reliability in mission-critical scenarios, accurate data for decision-making, and the overall effectiveness of military operations. The 'Updated' nature implies a need to keep pace with evolving threats, technological advancements, or changing operational requirements.

What are the key performance metrics and incentive structures within the Cost Plus Incentive Fee (CPIF) arrangement?

The specific key performance metrics and incentive structures for this $149 million contract are not detailed in the provided data. However, in a CPIF contract, the final profit is determined by the relationship between the final cost and the target cost, along with the achievement of specific performance objectives. The government sets a target cost and a minimum/maximum fee. If the contractor completes the work for less than the target cost, both the government and the contractor share in the savings. Conversely, if costs exceed the target, the contractor's fee is reduced. Performance incentives are often tied to factors like schedule adherence, technical performance, or quality standards. The effectiveness of the CPIF structure hinges on well-defined targets and measurable performance criteria that align with the government's objectives.

What is Lockheed Martin's track record with similar system integration and validation contracts for the Department of Defense?

Lockheed Martin Corporation is a major defense contractor with extensive experience in developing, integrating, and validating complex systems for the Department of Defense across various domains, including aerospace, naval, and intelligence systems. They have a long history of handling large-scale, high-value contracts. While specific details on contracts identical to the 'Updated Verification and Validation System for the USRL and NIRL' are not provided, Lockheed Martin's portfolio includes numerous programs involving sophisticated sensor integration, data processing, command and control systems, and mission-critical software development. Their track record generally indicates a capability to manage complex technical challenges and large budgets, though like any large contractor, they have also faced scrutiny on specific projects regarding cost and performance.

How does the $149 million contract value compare to historical spending on similar verification and validation systems within the DoD?

Direct historical spending comparisons for 'verification and validation systems' for specific platforms like USRL and NIRL are difficult without more granular data on those platforms and their prior system iterations. However, the $149 million value for a nearly five-year development and integration effort is substantial and aligns with the typical scale of major defense system upgrades. The cost-plus-incentive-fee structure suggests a complex undertaking where final costs can fluctuate. Benchmarking would ideally involve comparing this contract's scope, duration, and technical complexity against other DoD contracts for similar system development, particularly those involving specialized sensor, navigation, or guidance systems, to assess if the price is within a reasonable range, adjusted for inflation and technological advancements.

What are the potential risks associated with a sole-source award for a critical defense system?

The primary risks associated with a sole-source award for a critical defense system like this include: 1. **Higher Costs:** Without competition, the contractor has less incentive to offer the lowest possible price, potentially leading to inflated costs for the government. 2. **Reduced Innovation:** A lack of competitive pressure can stifle innovation, as the contractor may not feel compelled to explore more efficient or advanced solutions. 3. **Vendor Lock-in:** The government becomes dependent on a single supplier, making future transitions or upgrades more difficult and potentially more expensive. 4. **Quality Concerns:** While not guaranteed, the absence of multiple bidders scrutinizing each other's proposals and performance can sometimes lead to less rigorous quality control if not tightly managed by the procuring agency. 5. **Limited Transparency:** Sole-source justifications can sometimes obscure the true reasons for the award, reducing transparency for oversight bodies and the public.

Industry Classification

NAICS: Manufacturing › Navigational, Measuring, Electromedical, and Control Instruments Manufacturing › Search, Detection, Navigation, Guidance, Aeronautical, and Nautical System and Instrument Manufacturing

Product/Service Code: AEROSPACE CRAFT AND STRUCTURAL COMPONENTS

Competition & Pricing

Extent Competed: NOT COMPETED

Solicitation Procedures: ONLY ONE SOURCE

Solicitation ID: N0001919R0007

Offers Received: 1

Pricing Type: COST PLUS INCENTIVE FEE (V)

Evaluated Preference: NONE

Contractor Details

Parent Company: Lockheed Martin Corp

Address: 1 LOCKHEED BLVD, FORT WORTH, TX, 76108

Business Categories: Category Business, Corporate Entity Not Tax Exempt, Manufacturer of Goods, Not Designated a Small Business, Special Designations, U.S.-Owned Business

Financial Breakdown

Contract Ceiling: $196,536,063

Exercised Options: $196,536,063

Current Obligation: $149,091,346

Contract Characteristics

Commercial Item: COMMERCIAL PRODUCTS/SERVICES PROCEDURES NOT USED

Cost or Pricing Data: YES

Timeline